BLAW 220 Chapter 11 Questions

What must a party show to win a substantial performance lawsuit? Choose 2 answer choices.

1) The breach was not intentional. 2) He or she acted in good faith.

In many states, the release must also be:

Signed.A

What are consequential damages also known as?

Special damages, punitive damages, and nominal damages.

How is substantial performance involved with the classification of material breaches versus immaterial breaches?

Substantial performance involves an immaterial breach.

What must the party seeking rescission show?

That the contracting parties can be restored to the status quo.

What is the result of a contract in which both parties are wrong about a material fact of the contract?

The contract is voidable.

What is privity of contract?

The relationship that exists between the parties to a contract.

What are bilateral (mutual) mistakes of fact?

When parties reasonably interpret terms differently, the contract may be reformed or rescinded.

What is anticipatory repudiation?

A material breach involving a party repudiating a contract by communication through actions or words that he or she will not perform contractual obligations.

What is the difference between a material breach and an immaterial breach?

A material breach results in damages to the non-breaching party, while an immaterial breach is minor.

What must a mistake of fact be about?

A material fact.

What is substantial performance?

Involves minor breaches and occurs when one party fulfills the contractual requirements at a sufficient level to warrant payment, and is not considered to be a full breach of the contract.

What happens in a minor (immaterial) breach of contract?

In these cases, the contract is not discharged, or ended.

What is the other option the court can utilize instead of discharging the contract in question due to a breach?

A court may partially rewrite a contract to fix a mistake or to cure an unenforceable provision, rather than discharging the entire contract.

What is the statute of limitation for oral contracts?

2-3 years.

What are the requirements in order to discharge by novation from a contract?

1) Previous valid obligation. 2) Agreement by all parties to a new contract. 3) Extinguishing of old obligation (discharge of prior party). 4) New and valid contract.

What are the 2 types of performance that can qualify a contract to be discharged?

1) Strict performance 2) Substantial performance

What are the 2 types of mistake of fact?

1) Unilateral mistake 2) Bilateral mistake (Mutual mistake)

What is a material fact?

A fact that a reasonable person would consider to be important for making a decision regarding entering into a contract.

Who decides whether the completed work is sufficient when the parties disagree on if the completed work is sufficient?

A court.

What is subjective impossibility?

"I'm sorry, I simply can't do it"

What is objective impossibility?

"It can't be done"

What remedies are available in the case of a unilateral mistake in making a contract? Choose 2 answers.

1) Reformation 2) Rescission

What remedies are available after an anticipatory repudiation? Choose 3 answers.

1) Requiring assurance 2) Suspending performance 3) Cover

The court will not rescind contracts for mistakes related to:

1) A prediction error 2) Mistakes of value (quality) 3) Conscious uncertainty

What implied terms do all contracts include? Choose 2 answers

1) An implied covenant of fair dealing. 2) An implied covenant of good faith.

Which of these contracts would be enforceable, despite the existence of a mistake? Choose 2 answer choices.

1) Christopher agrees to sell his washer and dryer to Ella. Ella thinks the dryer uses gas instead of electricity, but she is incorrect. 2) Christopher agrees to sell his washer and dryer to Ella in "as is" condition. Ella thinks the set is in excellent condition and is willing to take a chance on buying it. Neither works after a few weeks of use.

What are the 4 types of damages awarded in breach of contract?

1) Compensatory 2) Consequential 3) Incidental 4) Liquidated

What are the differences between legal and equitable remedies? Choose 2 answer choices.

1) One is monetary. 2) One requires actions instead of damages.

What are most contracts?

Absolute promises.

Mistakes in contracts allow it to be:

Avoided, reformed, and rescinded.

Which mistake is likely to be voidable?

Bilateral mistake.

What is the most common way that duties under a contract are discharged?

By performance.

What does contract law allow?

Contract law allows a contract to be avoided based on mistake.

Why do courts rarely partially rewrite a contract to fix a mistake or to cure an unenforceable provision?

Courts general want parties to make their own decisions and deals.

What are compensatory damages (actual damages)?

Damages that replace the actual loss caused by the breach of contract with the goal of putting the non breaching party in the same position as if the breach did not occur.

Forcing a party to agree to the terms of a contract through the use of threats or blackmail is called:

Duress.

What can cause the performance of a contract objectively impossible, causing the discharge of the contract?

Earthquakes, fires, and hurricanes

What is commercial impracticablity?

Extreme difficulty or cost was unforeseeable when contract was formed.

What are equitable remedies based on?

Fairness and the prevention of unjust enrichment.

What are consequential damages?

Foreseeable damages incurred directly as a result of the breach which can include lost profits, lost business, and penalties assessed to the non breaching party.

How is a release generally binding?

If it is made in good faith (honestly) and is accompanied by consideration.

What rights does a third-party beneficiary to a contract hold in regard to that contract?

If the third party is an intended beneficiary of the contract, the third party has the right to sue either the promisor or the promisee.

What is a condition precedent?

In a contractual agreement, a condition that must be met before a party's promise becomes absolute.

What is the difference between legal remedies and equitable remedies for breach of contract?

Legal remedies are monetary while equitable remedies are non-monetary.

What type of remedy does breach of contract concerning specific performance in a contract is given?

Legal remedy, such as monetary damages.

You collect antiques and regularly travel the country looking for good deals. In your wanderings, you find an old fiddle and offer the owner $5. The owner accepts, and you take your treasure home. After you get the fiddle home and do your research on it, you discover the fiddle is actually worth $5,000. What a find! What do you think would happen if the owner tried to cancel the contract and get the fiddle back?

Mistake of value is not a valid defense to a contract, so the owner could not get his fiddle back.

What are the available legal remedies for breach of contract?

Monetary compensation for damages resulting from the breach that is aimed at putting the non breaching party in the same position he/she would have been had the contract been performed (completed).

LaVon contracts with Nathan for Nathan to sing at her comedy club every Friday night in July. The first Friday, the crowd loved Nathan. The second Friday, they booed him. The next week, Nathan got a better offer, so he hired his twin brother Ethan to fill in for him at LaVon's club. Can LaVon compel Nathan to perform?

No, because you cannot compel performance of personal services under specific performance.

What are equitable remedies?

Non-monetary remedies, meaning they provide some other type of remedy when financial remedies (money) are not sufficient to address the issues and to create a fair outcome, and are usually actions and not money.

What are examples of subjective impossibility?

Occurs when a party cannot deliver goods on time because of freight car shortages or cannot make payment on time because the bank is closed.

What is a bilateral mistake (mutual mistake)?

Occurs when both parties have a misunderstanding concerning a basic assumption upon which the contract was made.

What is a minor (immaterial) breach of contract?

Occurs when one of the parties fails to complete a minor part of the contract.

What is undue influence?

Occurs when one party dominates the other unfairly, therefore making the contract voidable since the contract now lacks voluntary consent.

What is a material breach of contract?

Occurs when one party fails to perform his or her contractual obligations in a way that harms the non-breaching party. The breaching party did not perform to the level of substantial performance, meaning the performance was non-existent or very deficient.

What is a unilateral mistake?

Occurs when one party is mistaken as to a material fact, and the other party is not mistaken.

What is breach of contract?

Occurs when one party to a contract fails to perform a contractual duty.

When does discharge of contract occur?

Occurs when the parties to a contract have no more duties.

What is conscious uncertainty?

One of the parties knows he or she is taking on a risk, and realizes there is some uncertainty about the subject matter of the contract.

What is a personal satisfaction contract based on?

Personal, subjective evaluation.

Fred and Wilma enter into a contract for horse riding lessons. Fred accidentally types the price for lessons to be $4.00 each instead of $44.00 each. Wilma wishes to enforce the contract at $4.00 per lesson. Which remedy would be most effective?

Reformation

What is strict performance? (aka complete performance, perfect performance)

Requires the parties to perform exactly as agreed to in the contract.

What are mistakes of value (quality)?

The mistake in judgment as to the fair market value, future value, or quality of an item by one of the parties.

Why is a contract involving an incorrect prediction enforceable?

The mistake must be of a fact, not "guessing" about something in the future.

What can the non-breaching party do to the breaching party when a material breach and/or anticipatory repudiation occurs?

The non-breaching party can sue for damages.

Why are contracts with mistakes of value (quality) enforceable?

The other party did not know the other party was mistaken.

What happens when one party breaches the contract?

The other party is discharged from contractual obligations and excused from performance. The non-breaching party can also sue for damages caused by the breach.

What is discharge by settlement agreement?

The settlement agreement will be substituted as a new contract and will either expressly or impliedly revoke and discharge the obligations under the prior contract.

What performance is required if the subject matter is impersonal (more professional)?

The standard performance is what a reasonable person would say is satisfactory, unless the contract states otherwise.

What happens is either or both parties make a mistake or have a misunderstanding regarding the terms of the contract or the facts of the situation?

The status or outcome of the contract can be affected.

What is assignment of rights?

The transfer of contractual rights to a third party.

What are incidental damages?

These damages include costs the party did not expect to incur, but experienced due to the breach.

True or False: Contracts must resume once temporary pause ceases.

True.

True or False: The essential feature of undue influence is that the party being taken advantage of does not exercise free will in entering a contract.

True.

What do courts usually rule in cases regarding unilateral mistakes?

Usually not voided; the courts usually hold the contract enforceable.

Describe value.

Variable.

What is rescission?

When courts or non breaching parties choose to rescind or cancel the contract when one of the parties breaches the contract, which has the same effect as if the contract never existed.

Is there a presumption of undue influence in certain situations?

Yes.

Yes or No: Can parties transfer delegated duties?

Yes.

What does a release bar?

Bars any further recovery beyond the terms stated in the release.

What does the law require for a personal service contract?

The personal service requirement must be stated.

What is the evaluation standard for a personal satisfaction contract? Choose 2 answer choices.

1) Objective, reasonable person standard 2) Subjective personal taste

When will the court impose an equitable remedy and force an action from the breaching party?

When monetary compensation is inadequate to compensate for breach of contract because of unique items in the contract.

What are examples of a personal satisfaction contract?

Interior decorating of a residence, quality standards imposed by an engineer on a project, etc.

Who is the promisor?

The party who made promise to benefit third party.

What are the required elements of fraudulent misinterpretation?

1) Misinterpretation of a material fact must occur. 2) Intent to deceive present. 3) Innocent party must justifiably rely on misinterpretation. 4) Party must have been harmed from misinterpretation to collect damages.

When is performance impossible?

1) Party dies or becomes incapacitated. 2) Specific subject matter destroyed. 3) Change in law renders performance illegal.

Which of the following is an equitable remedy for breach of contract?

An order for specific performance.

What duties cannot be delegated?

1) Performance depends on personal skill or talents of the obligor. 2) Special trust has been placed in the obligor. 3) Performance by third party will vary materially from the obligee's expectations. 4) Contract expressly prohibits delegation.

What are the 2 types of injunctions?

1) Preliminary 2) Permanent

What are the 4 types of damages?

1) Compensatory 2) Consequential 3) Punitive 4) Nominal

What is the statute of limitation for written contracts?

4-5 years.

What is release?

An agreement in which one party gives up the right to pursue a legal claim against another party.

What are the 3 ways discharge occurs?

1) Full performance. 2) Discharge by agreement. 3) The court discharges one or both of the parties by law.

Why do courts grant remedies to non breaching parties?

To give relief for the contract breach and nonperformance of contractual obligations.

When is a contract enforceable under which mistake circumstance?

When the mistake concerns future market value.

What happens when a party deviates from the contract?

A breach has occurred and the other party's obligations to perform is discharged.

In what situation could a party enforce strict performance? Choose 2 answer choices.

1) When the parties specifically agree to it in the contract. 2) When the requirement is reasonable.

What are the requirements of a personal judgement?

Must be honest and made in good faith.

What are liquidated damages?

With this type of damages, the parties agree in advance what the damages will be and include such damages in the contract.

What is an injunction?

An injunction is a court order that requires a party to do something or to refrain from doing something.

What is a personal satisfaction contract?

One party requires that the competed work must personally satisfy the party or a third party.

What happens when substantial performance occurs?

In general, if the party performs most, but not all, of the obligation, the other party must pay the amount due according to the contract, less the value of the defects.

Why does the personal satisfaction requirement must be clearly stated in the contract?

Because of the risks and possible abuses.

What is frustration of purpose?

Involves a decrease in value of what the party receives under contract.

Exceptions in the case of a mistake of fact that could cause the contract to be unenforceable include:

1) The other party to the contract knows or should have known that the mistake was made. 2) The error was due to substantial mathematical mistake and was made inadvertently and without extreme negligence. 3) Enforcing the contract would be unconscionable, extremely unjust, or harsh.

What are the legal differences between a material breach and an immaterial breach of contract? Choose 2 answer choices.

1) The level of the performance of the contractual obligations. 2) Whether the court will discharge the contract.

What are the requirements for substantial performance?

1) The party acted in good faith. Intentional failure to comply with the contract is breach, not substantial performance. 2) The performance did not vary greatly from the performance required in the contract. The other party received sufficient benefit. 3) The imperfect performance can be remedied with monetary compensation. 4) The performance must create substantially the same benefits as those promised in the contract. In other words, the other party can use the item for its intended purpose.

What are the 3 instances where a bilateral mistake could occur?

1) They are both mistaken about the same material fact. 2) The contract is based on a fundamental factual error by both parties. 3) Both parties are mistaken as to the existence or identity of the subject matter of the contract.

What are rights that cannot be assigned?

1) When a statute expressly prohibits assignment. 2) When a contract is personal in nature. 3) When an assignment significantly changes the obliger's risk or duties. 4) When contract prohibits assignment.

What is duress?

A defense to contract enforcement, includes: illegal threats, blackmail, extortion to induce consent, etc., which is grounds for rescission.

What is impossibility of performance?

A doctrine under which parties to a contract are relieved of their duty to perform when performance becomes objectively impossible or totally impracticable (through no fault of either party).

What is discharge by mutual rescission?

An agreement between the parties to cancel their contract, releasing them from further contractual obligations. The object is to restore the parties to the positions they would have occupied had no contract ever been formed.

What is an example of an instance where the courts would discharge the contract when there is a breach of contract regarding strict performance?

When products or components must meet precise standards for health or safety reasons or they cannot be used.

What happens when anticipatory repudiation occurs?

With a material breach, the contract is discharged (ended), because courts want to encourage contracts with minor issues to proceed, but when the parties are encountering major issues, the contract should end.

Why in a breach of contract concerning specific performance, an equitable remedy is not used?

Courts generally refrain from forcing parties to comply with the terms of a contract when a party breaches their contractual obligations, and the courts would rather award monetary damages than force parties to do something they refuse to do.

What do courts do when there is a breach of contract regarding strict performance?

Courts rarely discharge contracts if the contract is not perfectly carried out unless the contract expressly requires it and the requirement is reasonable.

What does the courts normally do in the case of a bilateral mistake?

In these cases, the contract is voidable and either party can rescind (cancel) the contract.

What can the non-breaching party do when the breaching party engages in a minor (immaterial) breach of contract?

The non-breaching party can sue the breaching party for any damages caused by the breach.

What is discharge by accord and satisfaction?

The parties agree to accept performance that is different from the performance originally promised.

What performance is required if the subject matter is personal.

The performance must satisfy the party unless that party is acting in bad faith.